Enabling Canadians to further delay collecting Canada Pension Plan (CPP) benefits would make it easier to provide for retirement, argues a new report from the C.D. Howe Institute.
The Toronto-based think tank says in a new report that government policy-makers should push back the deadline for Canadians to begin collecting their CPP (or Quebec Pension Plan [QPP] benefits in Quebec), to age 75 from age 70. Extending the deferral period would make planning for retirement easier for workers who are utilizing RRSPs or defined contribution plans, the group says.
The report maintains that public programs such as CPP, QPP and old age security (OAS), can provide a greater proportion of Canadians’ retirement needs when benefits are deferred.
“The deferrals enhance the annual amounts of CPP/QPP and OAS received, which in turn lowers the amount of private savings required,” notes one of the report’s authors, Bernard Morency, adjunct professor at HEC Montreal. “Pension deferral is thus both an effective means of reducing the savings required overall and of reducing risk.
“Pushing back the deferral period to age 75 would enhance retirement planning flexibility for many middle-income Canadians,” Morency adds. “As we wait for broader enhancements to be completed over the coming decades, this reform would be a good first step.”
Adds report co-author Antoine Genest-Grégoire, senior research associate, Université de Sherbrooke: “Extending the CPP/QPP and Old Age Security deferral periods is an immediate fix, right now, for sustainable public pension provision.
“Our modelling shows this step could help retirees worried about running out of savings or not hitting their retirement income goals,” Genest-Grégoire continues. “Delaying public pension take-up would allow middle- and upper-middle income Canadians greater retirement planning flexibility, to the extent they have private savings to rely on in the meantime.”